How fast did developing country poverty fall during the 1990s? Capabilities-based tests of rival estimates Darryl McLeod T Economics Department, Fordham University, 441 East Fordham Road, New York, 10458, USA Received 19 January 2004; received in revised form 17 July 2005; accepted 16 August 2005 Available online 30 January 2006 Abstract Non-nested hypothesis tests are used to rank eight widely used international per capita income and poverty measures with respect to how well they predict changes in capabilities: lower child mortality, higher enrollment rates, better nutrition, etc. National accounts based generally out-perform survey-based growth and poverty estimates in these tests. D 2005 Elsevier B.V. All rights reserved. Keywords: Economic growth; Poverty; Household surveys; Developing countries JEL classification: I32; O15 Exactly how fast household consumption rose and poverty fell during the 1990s is the subject of some controversy. 1 World Bank household surveys suggest developing country consumption per capita grew about 1–2% annually during the volatile 1990s. However, national accounts based estimates have per 0165-1765/$ - see front matter D 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2005.08.009 T Tel.: +1 718 817 4063; fax: +1 718 817 3518. E-mail address: mcleod@fordham.edu. URL: http://www.fordham.edu/economics/mcleod. 1 If inequality changes slowly, changes in per capita income and poverty should be correlated with other non-monetary measures of physical well-being. To test World Bank poverty rates, Kashenas (2001) regresses the UNDP’s HDI index and the FAO’s proportion malnourished on alternate poverty rates, but does not report formal hypothesis tests nor does he pit changes in poverty against standard per capita income and consumption growth rates. McLeod (2003) use a similar approach to test whether various Latin American poverty estimates out-perform per capita income in predicting non-monetary welfare indicators. Economics Letters 90 (2006) 297 – 303 www.elsevier.com/locate/econbase